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Financial stability of insurers: market discussion outcomes

5 June 2019
News

The Bank of Russia has updated its concept for assessing financial stability of insurance companies based on comments received from the insurance community.

The new approach to assessing financial stability of insurance companies is supposed to be implemented over a set period of time. For example, the regulator intends to achieve a stability level of 90% by 2025. This figure means that insurers will need to maintain capital adequacy that will allow them to survive economic shocks. It is planned that in the future (but no earlier than in 10 years) the financial stability of insurers will reach 99.5%. This is a target level in international practice, including Solvency II.

The updated financial stability model also takes into account the insurance community proposal that the assessment should not only include the influence of risks on assets, but also on liabilities of insurers, and that the concentration risk limit should not be applied to foreign insurers with a credit rating of ‘A’ and above established in OECD member-states. Furthermore, it is supposed that receivables in the amount of the unearned premium reserve will be accounted as part of ‘good’ assets. Transitional periods will be set for different risk types and for increasing the stability level for the purpose of financial stability assessment.

Amendments to laws and regulations will be developed based on the concept. They are expected to become effective by mid-2021.

Preview photo: Billion Preview photos / shutterstock
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